Tuesday, July 31, 2012

Romney’s “Five Point Plan to Grow the Economy” that he touts on his website, is primitive economics almost beyond belief. It returns us to 19th century government of the few by the few with few regulations or insurance against the kinds of events that brought on the Great Depression and Great Recession, for starters.

Conservatives in general and Mitt Romney don’t seem to understand the most basic concept of modern economics--insuring against major disruptions—that is indispensable to run a modern economy. Insurance isn’t only about insuring the many to protect the most vulnerable—whether against physical disasters such as the Midwest drought, or financial disasters such as the Great Depression, or catastrophic illness. It is really about all of our citizens being for one, and one for all. It is why we tax ourselves to pay for a government, because government is really the protector of last resort against the most basic risks in a world grown increasingly complex and uncertain.

Modern economies can’t do without it, yet Romney says he opposes most modern forms of protection in his 5-point plan by continuing to reduce taxes that would starve government of revenues, as well as cap spending on regulation enforcement. He would also repeal the Affordable Care Act that insures 30 million more Americans. Instead he proposes more of GW Bush’s ‘Ownership Society’ which seeks to return us to the era of laissez faire, free, unregulated markets that existed 100 years ago. And we know the damage those institutions which evaded or ignored modern financial regulation did to financial markets.

Then was a much smaller, less complex world where most Americans were still living on farms. But the farming world collapsed in the 1920s when mechanization caused farming prices to plunge, ultimately bringing on the Great Depression. That is when the modern, industrial world came into being, requiring New Deal insurance; including social security, unemployment insurance, and even workman’s compensation to cushion the effects of modern business cycles on the urban unemployed who could no longer return to the farm during tough times. And unions came into being to organize workers so they could bargain for better than minimum wages and benefits.

The centerpiece of Romney’s plan is to continue to cut taxes for both individuals and corporations. This is when corporations have the highest profits as a percentage of GDP in history, while most individual tax cuts have benefited the wealthiest, thus creating the worst income inequality since the 1920s.

Graph: CBPP

And in starving the government of revenues he would impose a regulatory budget cap, “reform” regulations so that coal-fired power plants would no longer have to control their pollution (thank you, Koch Brothers, for your $millions in contributions), open ANWAR, the Arctic National Wildlife Preserve to oil drilling, and in general continue to support our most polluting, non-renewable energy resources.

Returning the U.S. to an almost primitive society is already happening, of course, with continuing Republican attempts to block Dodd-Frank regulation, privatize Medicare and social security. The Great Recession was a product of Adam Smith’s primitive economic theory that said an ‘invisible hand’ controls markets for the benefit of all.

Really? That hasn’t been the case during the past two GW Bush recessions, including the Great Recession. $Trillions were lost during those recessions that were the result of inflated asset bubbles bursting, as regulations were ignored or evaded which controlled financial risk-taking. The Bush record is not pretty, and that is the most recent record to look at that is the result of primitive economic thinking.

Graph: Calculated Risk

The historical graph of economic growth shows most clearly which policies work to grow the economy—primitive economic policies, or using government as an active participant in growth? In fact, all recent recessions since 1980 have occurred during Republican administrations; from President Reagan’s in 1980, 1983, Bush I in 1991, and GW Bush in 2001 and 2007-09. Policies that starve government of what is needed to govern effectively starves all of U.S. Need we say more?

Thursday, July 26, 2012

The summer growth numbers seem weak, and pundits are saying it’s due to the European recession (so lower exports), the ‘fiscal cliff’(employers uncertain about future growth), and consumers with too much debt. But the numbers really show a repeat of last summer, when hiring slowed due to basically the same worries but picked up again in the fall (due to the Japanese Tsunami instead of euro, and debt cap stalemate that downgraded U.S. debt).

However, overall growth is still weak because so much income has been transferred to the wealthiest; particularly since 2000 and the Bush tax breaks, leaving middle class earners with even less income than in 2000. In fact, middle incomes have not even kept up with inflation since 2000. And middle income earners—i.e., most consumers—have been the main engine of U.S. growth since World War II.

Graph: CBPP

The good news is the Conference Board’s Index of Leading Economic Indicators which seems to alternate in up and down months, still shows moderate growth prospects for the rest of the year.

Graph: Econoday

For instance, since July 2011 growth in the Coincident Indicators that tracks GDP growth has been positive 8 of the past 12 months, with huge spikes in October and December 2011 and only 1 negative month in March 2012. The Leading Indicator that attempts to predict growth over the next 6 months was more negative with 4 contractions in 12 months. But in fact, the Leading Indicator has grown 1 percent in the past 6 months, up from 0.5 percent over the prior 6 months, signaling better prospects for growth.

So why all the fears of a dismal rest of the year? Could it be the 24/7 news cycle that exaggerates both the good and bad news? That is what causes most ‘bubbles’, according to Robert Shiller of Irrational Exuberance fame. We are literally being showered with too much economic data that even economists are hard put to understand.

For instance, other indicators also point to better growth in the fall. By major components, June industrial production gained 0.7 percent after falling 0.7 percent in May, according to the Fed. Motor vehicles output added significantly to manufacturing, rebounding 1.9 percent in June after a 2.2 percent decline in May. Manufacturing excluding motor vehicles was quite strong also gaining 0.6 percent in June, following a 0.5 percent drop in May.

Graph: Econoday

So once again growth far outnumbers contraction in the manufacturing sector, with just 4 contractions in the past 17 months. So it seems rumor drives much of business and consumer confidence, as Europe’s problems seem to be affecting U.S. growth, but know one knows how much. So it is all about ‘momentum”, the magic word that spurred so much inflated stock values in the last decade, but now seems to deflate expectations for future growth!

What to do about this? Firstly, we need to counter the pessimists with greater stimulus spending, which more than pays for itself in increased activity. It can even be revenue neutral. For the real reason growth has been so tardy is most of the profits from the past 10 years of growth have gone to the wealthiest, thanks both to record corporate profits, and record tax cuts for the investor class, as I said—the lowest tax rates since the 1920s—that have drastically lowered tax revenues and increased the federal deficit.

So right now, it is the intransigence of many of the richest among us (such as Mitt Romney with his tax havens) who refuse to divert some of their wealth to provide more stimulus during a time of record income inequality. It is their refusal to return to the pre-Bush, Clinton-era taxation levels of 1992-2000 when most growth occurred and most jobs were created, in other words, that is holding back a real recovery.

Tuesday, July 24, 2012

The shooting in Aurora’s Central Theatres is not something “impossible to understand” as was said by Denver’s Mayor just after the massacre, if we look at the culture of violence that has made U.S. the most violent nation on earth. In fact, gun violence, as violence in general, has too many causes. Studies bear out that record income inequality, a poor social safety net and lax, almost nonexistent gun control laws all contribute to the U.S. record as the most gun violent culture in the world.

The Trayvon Martin killing illustrated this culture with the Stand Your Ground Laws being enacted in several states. And thereby we are beginning to see where the National Rifle Association, backed by some elements of Big Business, is leading this country—into a greater lawlessness, at the very least. For the Stand Your Ground Law enshrines the gangster code—shoot first and ask questions later.

As Paul Krugman said in a March New York Times Op-ed after the Trayvon Martin killing:

“Specifically, language virtually identical to Florida’s law is featured in a template supplied to legislators in other states by the American Legislative Exchange Council, a corporate-backed organization that has managed to keep a low profile even as it exerts vast influence (only recently, thanks to yeoman work by the Center for Media and Democracy, has a clear picture of ALEC’s activities emerged). And if there is any silver lining to Trayvon Martin’s killing, it is that it might finally place a spotlight on what ALEC is doing to our society — and our democracy.”

Krugman was exposing the links between corporations and the NRA that continues to push for guns to be worn by everyone everywhere, with or without background checks or even licenses.

Why the push by the NRA, and Big Business for more guns, as I said back in April? The reason mostgun advocates and the NRA give, is that it is for the purpose of self-defense in an increasingly violent world. The NRA even asserts it decreases violence. But studies cited in an excellent book, Gun Violence:The Real Costs by Philip J. Cook and Jens Ludwig show that gun use tends to increase gun violence—i.e., there are almost 4 times more fatalities in gun-related robberies than other robberies with knives, clubs, etc.

And a study cited in the Justice Department’s National Crime Victimization Survey (NCVS) on home invasions found that just 3 percent were able to use guns against someone who broke in (or attempted to do so) while they were at home, when 40 percent of households have guns.

So it turns out guns are not very helpful in self-defense. Also overlooked is the fact that criminals are predators, and predators prey on the weakest and most vulnerable, not those who look like they can defend themselves. So really, does the agenda of the NRA to abolish all gun controls do more than reinforce the fear factor, the fear that your neighbor may be your assailant?

“But where does the encouragement of vigilante (in)justice fit into this picture?” asks Krugman. “In part it’s the same old story — the long-standing exploitation of public fears, especially those associated with racial tension, to promote a pro-corporate, pro-wealthy agenda. It’s neither an accident nor a surprise that the National Rifle Association and ALEC have been close allies all along.”

The culture of violence is not a pretty picture in our crowded cities in particular. Philadelphia averaged more than 30 gun-related deaths per month in 2011, when Europe as a whole had less than 300 per year. The last time U.S. gun violence was this high was during the Great Depression, when we had gangsters like Al Capone, John Dillinger, and Bonnie and Clyde.

English Sociologist Richard Wilkinson has brought this out in books and lectures, especially his TEDx lecture on the roots of violence and crime, in which he charts that countries with the most inequality in wealth are also the most violent countries. And surprise, the U.S. is now one of the most unequal countries—in terms of wealth and opportunities for wealth—in the world, as has been brought out by the CIA World Factbook. It is ranked 94th of the 136 countries ranked by the for income inequality, close to Camaroon, Zimbabwe, some of Africa’s poorest countries.

There are many who will say that the deeds of a psychopath cannot be prevented. But is that the point when it is so ridiculously easy for an individual to purchase an arsenal without an alarm being set off? Why would anyone need 6,000 rounds, for instance, said the New York Times?

“With a few keystrokes, the suspect, James E. Holmes, ordered 3,000 rounds of handgun ammunition, 3,000 rounds for an assault rifle and 350 shells for a 12-gauge shotgun — an amount of firepower that costs roughly $3,000 at the online sites — in the four months before the shooting, according to the police. It was pretty much as easy as ordering a book from Amazon.”

Do we need another reason to demand laws that require the reporting of such weapon sales?

Wednesday, July 18, 2012

There is growing optimism that the real estate bust is finally at an end. The cause is a combination of record low interest rates leading to more refinance activity and increasing confidence of consumers in the economic recovery. For the first five months of 2012, more than 78,000 homeowners who owe more than 105 percent of their property’s value have refinanced using the government’s Home Affordable Refinance Program, or HARP. That was up from about 60,000 in all of 2011, the Federal Housing Finance Agency said in a recent report.

Much of it is due to HARP 2.0 that removed loan to value caps on mortgage amounts higher than the property value. The removal of the 125 percent LTV cap and certain risk-based fees for refinancing enabled more underwater borrowers to access refinancing through HARP 2.0. HARP volume represented 20 percent of total refinance volume in May, the highest percentage reported since the inception of HARP. One in five refinanced loans in May was originated through HARP, according to the FHFA.

Borrowers with LTV greater than 105 percent accounted for 32 percent -- or almost one third -- of HARP volume, up from 15 percent in 2011. In addition, an increasing number of underwater borrowers chose shorter-term 15- and 20-year mortgages, which build equity faster than traditional 30-year mortgages.

Graph: Calculated Risk

Interest rates in California have dropped as low as 3.375 percent for conforming 30-year fixed to $417,000 and 3.625 percent for jumbo conforming fixed rates to $625,500 for owner-occupied single units with zero points origination fees.

This is why the MBA’s Refinance Index increased 22 percent from the previous week and is at the highest level since mid-June. The seasonally adjusted Purchase Index decreased 0.1 percent from one week earlier, though builder optimism jumped another 6 points to 35, the highest level since March 2007, according to the National Association of Home Builders.

“Combined with the upward movement we’ve seen in other key housing indicators over the past six months, this report adds to the growing acknowledgement that housing – though still in a fragile stage of recovery – is returning to its more traditional role of leading the economy out of recession,” noted NAHB Chief Economist David Crowe. “This is particularly encouraging at a time when other parts of the economy have begun to show softness, and is all the more reason that the challenges constraining housing’s recovery – namely overly tight lending conditions, poor appraisals and the flow of distressed properties onto the market – need to be resolved.”

Calculated Risk reports that “Refinance application volume increased last week to near peak levels for the year as mortgage rates dropped to a new low, driven down by growing concerns about the health of the US economy,” said Mike Fratantoni, MBA’s Vice President of Research and Economics. “Applications for HARP refinance loans accounted for 24 percent of refinance activity last week, in line with the HARP share for the past few weeks.”

Consumers seem to be doing fine, as I said last week, in spite of their worries about jobs, the economy and budget deficits (their own more than governments’). Consumer credit jumped $17.1 billion in May for the largest increase since the $19.1 billion boost seen in November 2011. Gains for the latest month were seen in both revolving and nonrevolving credit.

And the U.S. Census Bureau reports that Privately-owned housing starts continued their monthly increase in June, at a seasonally adjusted annual rate of 760,000, the highest rate since October 2008. This is 6.9 percent above the revised May estimate of 711,000 and is 23.6 percent above the June 2011 rate of 615,000. Single-family housing starts in June were at a rate of 539,000; this is 4.7 percent above the revised May figure of 515,000. The June rate for units in buildings with five units or more was 213,000.

Graph: Calculated Risk

Why have interest rates continued downward to the lowest levels since World War II? We can thank the nervousness of foreign investors worrying about recessions in Europe and China that are parking their money in U.S. Treasury Bonds. The 10-year benchmark bond yield has dropped to 1.5 percent, which sets the level for mortgage rates. So where else are investors looking to make money? In real estate, it seems.

Tuesday, July 17, 2012

Consumers seem to be doing better, as I said last week, in spite of their worries about jobs, the economy and budget deficits (their own more than governments’). Consumer credit jumped $17.1 billion in May for the largest increase since the $19.1 billion boost seen in November 2011, which means they are spending more. Gains for the latest month were seen in both revolving and nonrevolving credit.

Graph: Econoday

Nonrevolving credit, which is being driven higher by strong demand for student loans including in the latest month, rose $9.1 billion. Auto loans also played a supporting role. Revolving credit jumped a giant $8.0 billion which is by far the strongest gain of the recovery. A key question is why revolving credit rose so much. Are consumers more confident about jobs and are more willing to spend? Are consumers using credit cards to fill in for slumping income?

The data do not directly answer those questions, says Econoday. Odds are it is a combination of both. Consumers with jobs are less worried about a layoff. And consumers that are underemployed may be resorting to credit cards. But on a clearly positive note, credit card issuers indeed have returned to the practice of extending credit. Overall, the boost in credit outstanding is helping to sustain the recovery.

One big mystery is why retail sales have been falling, but once again the Commerce Department is using a seasonal adjustment factor, which means sales may actually be rising, but not as fast as in past summers.

Graph: Calculated Risk

The U.S. Census Bureau said that advance estimates of U.S. retail and food services sales for June, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $401.5 billion, a decrease of 0.5 percent from the previous month, but 3.8 percent above June 2011. The press release also said that the monthly estimate has a ±0.5 error range, and the annual estimate could be off by as much as ±0.7 percent. And we know unit auto sales are surging, so retail sales estimates are notoriously volatile and subject to revisions.

But there is another adjustment that may be skewing the retail numbers, which don’t adjust for price changes, as we said. That is plunging prices that are putting us into deflationary territory.

Graph: Econoday

Though the producer price index in June edged up 0.1 percent, it followed a sharp 1.0 percent plunge the prior month. And it had been following sharply since February 2012. This can be attributed to falling demand, of course, but that might be from other parts of the world, like Europe that is falling back into recession, or China that recently lowered its interest rates to boost domestic demand. In April, China’s producer price index (PPI) was negative, and this contraction has since gathered steam. In June, prices fell 2.1 percent year-on-year, suggesting a large part of the economy is already in deflation. .

But though job worries for the unemployed are paramount, their prospects may also improve in coming months, according to the latest JOLTS report. There were 3.6 million job openings on the last business day of May, little changed from 3.4 million in April, said the U.S. Bureau of Labor Statistics. But what is little about the fact that it is way up from 2.4 million openings at the end of the recession in June 2009?

Graph: Calculated Risk

Jobs openings increased in May to 3.642 million, up from 3.447 million in April. The number of job openings (yellow) has generally been trending up, and openings are up about 18 percent year-over-year compared to May 2011. Quits increased slightly in May, and quits are now up about 6 percent year-over-year. These are voluntary separations and more quits might indicate some improvement in the labor market (see light blue columns at bottom of graph for trend for "quits").

We will have more to report on industrial production, retail and housing sales later in the week. They may show that although the economy has slowed during the summer months, growth should pick up in the fall.

Friday, July 13, 2012

Consumers seem to be doing fine, in spite of their worries about jobs in the latest University of Michigan sentiment survey, the economy and budget deficits (their own more than governments’). June average hourly earnings improved to a 0.3 percent boost from 0.2 percent in May, in the latest unemployment report. And two leading indicators for hiring were up. First, the average workweek edged up to 34.5 hours from 34.4 in May. Second, temp worker hirings were up 25,000 after a 19,000 boost in May. This should presage more job creation in the fall.

Graph: Calculated Risk

Even though job creation was sluggish in June so that the unemployment rate didn’t change at 8.2 percent, there are some positive signs for manufacturing and personal income. Strength was in the goods-producing sector. Employment in this sector rebounded 13,000 after a 21,000 decline in May. Manufacturing increased 11,000 after a 9,000 rise in May. Construction posted a modest 2,000 gain after dropping 35,000 the month before.

Either consumers are little more optimistic about the economy than they admit in confidence surveys or cars are getting too old and need replacing or some of both. Regardless, demand picked back up in this portion of the consumer sector in June.

Graph: Econoday

Unit new motor vehicle sales rebounded 2.2 percent to a 14.1 million annual rate from May's rate of 13.8 million. Strength was in domestic cars which jumped 5.5 percent and in domestic light trucks, up 3.6 percent, for combined domestic units of 11.1 million annualized versus 10.6 million in May.

So personal expenditures are still increasing, up almost 2 percent, which is why Gross Domestic Growth is also up 1.9 percent this year to date. It means consumers are still cautious, as not enough jobs are yet being created.

Lastly, the surest sign of consumer health is the Federal Reserve’s monthly Consumer Credit report, which totals all consumer borrowing. Borrowing is up a whopping 8 percent in May, most of it revolving, credit card debt. This is the highest total since 2007, before the Great Recession, and double recent borrowing, which means consumers are feeling confident enough to actually increase their spending. Consumer borrowing had averaged 4 to 5 percent increases since 2007.

We will have more to report on industrial production, retail and housing sales next week. They may show that although the economy has slowed during the summer months, growth should pick up in the fall.

Thursday, July 12, 2012

Is history repeating itself? Once more the June jobs numbers don’t look so good, but once more they will probably be misleading. Because, once more, it looks like the so-called seasonal adjustments (SA) are overestimating the summer jobs totals that would be normal with a robust economy, but not this one.

The June employment numbers weren’t much better than May, which was “horrible," according to Ian Shepherdson, chief economist at High Frequency Economics, if you remember. The unemployment rate held at 8.2 percent, with just 80,000 payroll jobs created, vs. the 77,000 created in May, revised up from an initial 69,000 May payrolls increase.

But once again, we may see more upward revisions to job creation in coming months. Why? Because the ‘seasonal adjustments’ seem way out of wack. For instance, June nonfarm payrolls actually rose 391,000 before their seasonal adjustment. And the actual adjustment was a subtraction of 1,028,000 from actual jobs created, the estimate of ‘normal’ increases from summer employment of students and the like. In other words, the SA only counts the number above what should be normal job formation for June.

The Household Survey that includes self-employed fared no better with the seasonal adjustment. Actually 475,000 more jobs were created in June than May before the adjustment, and just 128,000 was the net increase afterward. The total seasonal adjustment was a subtraction of 787,000 jobs, meaning 787,000 jobs were subtracted from the actual job total for June.

Graph: Calculated Risk

We have been here before, as I’ve said. Last summer’s scare came when the Bureau of Labor Management had to revise from 0 to 57,000 jobs created in August, and added an additional 42,000 payroll jobs in July when revised. This was because the so-called seasonal adjustments were overestimated then, also. This recovery has been tepid at best. There was another first quarter spurt in hiring as last year, then not much job creation in summer. So once again, the seasonal adjustment seems excessive, and will surely be scaled back as with last year, adding more jobs after the fact.

One concrete reason I believe jobs numbers will be revised upward is June average hourly earnings improved to a 0.3 percent boost from 0.2 percent in May, in the Establishment Survey. And two leading indicators for hiring were up. First, the average workweek edged up to 34.5 hours from 34.4 in May. Second, temp workers were up 25,000 after a 19,000 boost in May.

Meanwhile, both the industrial and service sectors were basically unchanged. The ISM non-manufacturing composite headline index slipped to 52.1 versus 53.7 in May but it's still safely above the 50 level under which monthly contraction is indicated. The new orders index is the most important component and it posted at 53.3, compared to 55.5 the prior month, probably because May had a large surge in new orders. Export orders fell in the month which is no surprise given troubles in Europe and China, as did total backlog orders, said Econoday.

Graph: Econoday

However, the ISM's manufacturing index showed contraction in June for the first time since July 2009, declining to 49.9 (breakeven at 50) from 53.5 in May. Forward momentum hit the wall at the new orders index, at 47.8 in June versus a huge 60.1 the month before. It showed contraction for the first time since April 2009 and the degree of the decline was the steepest since October 2001, but the large drop is suspicious, as the factory orders component rose more than expected. For what it’s worth, said Econoday, the October 2001 drop in orders was followed by an almost equal rebound the next month and was above the pre-drop level the second month afterwards.

Graph: Econoday

What to make of all this? Consumer Credit jumped 8 percent in May, the largest rise in borrowing since 2007 and the boom years, according to the Federal Reserve. So consumer spending will rise in coming months, the main engine of growth in our economy. That may be why construction spending is surging, another indicator that real estate is finally on the recovery.

Graph: Econoday

Construction spending jumped 0.9 percent in May, following a 0.6 percent gain in April. The increase in May was led by private residential outlays which increased 3.0 percent after a 1.7 percent boost in April. The new multifamily subcomponent showed the greatest strength but the new single-family subcomponent also was notably positive. On a year-ago basis, overall construction stood at up 7.0 percent in May.

So because the seasonally adjusted numbers are notoriously inexact, we cannot be sure that an economic slowdown is even happening. It could be the seasonal fluctuations that are normal for any business cycle, as we said last month. I would venture that we might see upward revisions of some 50,000 per month in nonfarm payrolls, if precedent holds and history repeats itself.

Tuesday, July 3, 2012

Hallelujah. The Supreme Court of our land has given Obamacare a clean constitutional bill of health, thanks to its Chief Justice, who says government does have the power to tax those who can afford to buy health insurance, but won’t.

Republicans have framed Obamacare, or the Affordable Care Act, as a loss of individual freedom. But the only freedom lost is the freedom to be treated without having to pay for it, which is what the uninsured do when they have to go to emergency rooms. Most of us have health care, of course, if we have family and children to care for. Individual responsibility really means one should have to pay for their own health care, rather than taxpayers or the already insured.

So why are Republicans so adamantly against it, when they claim to believe in individual responsibility, and the constitution? It is because they might be taxed more, and of course all taxes are fundamentally evil. They say they abhor any kind of government aid or regulation as if they lived 100 years ago, when everyone had to take care of themselves—or suffer the consequences. But that was when birth and death rates were far worse than today, and we lived shorter lives. Are there any Republicans who would like to return to those days? Please stand up!

More Americans will be healthy, both physically and financially, since medical bankruptcies will become rarer and serious disease rates should drop, since preventative health care will be encouraged. And simple math tells us that with some 30 million more insured due to the mandate requirement, health care costs will be spread among more users of health care.

So know that health care premiums will drop, since as with Medicare, administrative costs will be severely restricted—85 percent of premiums have to be spent on health care—so that providers cannot as they currently use 25 percent of their premiums just for marketing, which means overselling all those medicines (like erectile dysfunction aids) that choke our daily television screens.

Actually, the real results of what is not yet a universal health care system with 20 million are not being openly discussed, at least yet. It should release a surge of consumer spending, for instance, according to economists such as Robert Shiller. Consumers will no longer have to put so much aside for those sick days because they no longer have to worry so much about budget busting medical bills. They might even enjoy more vacation days to spend with their families, if they take advantage of available preventative care measures for such things as obesity and bad diets.

Yale Economist Shiller has been advocating just such universal insurance for years in books such as The New Financial Order, Risk in the 21st Century, and Finance and the Good Society. It is part of his thesis that with the new information age ability to collate huge amounts of information we can level the playing field against risky outcomes, such as loss of income, or value in one’s home, or even serious illness, by insuring against such outcomes.

“If firms and individuals cannot insure themselves against bad outcomes, they will be necessarily cautious; the economy will grow more slowly than it should,” says a New York Times book review of Finance and The Good Society. “A company will not invest in a new factory if it cannot hedge against swings in exchange rates that might render its investment unprofitable. An individual will not consume to the full extent of his capacity if he cannot insure his house or health.”

So now we at least will have a better health care system. It’s a start.

Harlan Russell Green, Editor/Publisher

Harlan Green is a Mortgage Broker in Santa Barbara, California since the 1980s and economist. As Editor/Publisher of PopularEconomics.com, he has published 3 weekly columns-- Popular Economics Weekly, Financial FAQs, and The Mortgage Corner-since 2000, and is a featured business columnist for Huffington Post. Please refer to the populareconomics.com website for further information.